Oil heads for biggest weekly gains in over a year ahead of Storm Ida

© Reuters. FILE PHOTO: A sticker reads crude oil on the side of a storage tank in the Permian Basin in Mentone, Loving County, Texas, U.S. November 22, 2019. REUTERS/Angus Mordant

By Scott DiSavino

NEW YORK (Reuters) - Oil prices rose more than 2% on Friday and were on track for their biggest weekly gains in over a year as energy firms began shutting production in the U.S. Gulf of Mexico ahead of a major hurricane expected to hit early next week.

Brent futures rose $1.56, or 2.2%, to $72.63 a barrel by 11:51 a.m. EDT (1551 GMT), while U.S. West Texas Intermediate (WTI) crude rose $1.48, or 2.2%, to $68.90.

That puts Brent on track for its highest close since Aug. 2 and WTI on track for its highest close since Aug. 12.

For the week, both benchmarks were up about 11%, which would be their biggest weekly percentage gains since June 2020.

"Energy traders are pushing crude prices higher in anticipation of disruptions in output in the Gulf of Mexico and on growing expectations OPEC+ might resist raising output given the recent Delta variant impact over crude demand," Edward Moya, senior market analyst at OANDA, said.

U.S. oil and gas companies on Friday raced to complete evacuations from offshore Gulf of Mexico platforms as Tropical Storm Ida, which is expected to strengthen into a major hurricane before slamming into Louisiana early next week, advanced towards oilfields that provide about 17% of the nation's oil production.[nL1N2PX2NH][nL1N2PY1IP]

Gulf of Mexico offshore wells also account for about 5% of dry natural gas production. Over 45% of total U.S. refining capacity lies along the Gulf Coast.

The prospect of U.S. Gulf supply outages helped to reverse Thursday's losses, which had been partly spurred by output returning at a Mexican oil platform following a fatal fire on Sunday.

Oil prices were also supported by a decline in the U.S. dollar to a one-week low versus a basket of other currencies after U.S. Federal Reserve Chair Jerome Powell stopped short of signalling the timing for a policy shift.[USD/]

A weaker U.S. dollar makes oil less expensive for holders of other currencies.

The U.S. economy continues to make progress towards the Fed's benchmarks for reducing its pandemic-era emergency programs, Powell said on Friday in remarks that defended the view current high inflation will likely pass.

U.S. consumer spending slowed in July as a decline in motor vehicle purchases due to shortages offset a rise in outlays on services, supporting views that economic growth will moderate in the third quarter amid a resurgence in COVID-19 infections.

U.S. consumer sentiment, meanwhile, plunged to its lowest level in nearly a decade in August as consumers' views of their personal financial prospects continued to worsen due to smaller income gains amid higher inflationary trends, a survey showed on Friday.